A critical part of every asset management organization is the submission of the upcoming year's capital budget. Being able to accurately forecast capital needs enables better cash flow projections and/or debt requirements. If the numbers submitted by the maintenance managers are inaccurate, the repercussions can be devastating to cash flow as well as to operations. The most common causes for missed maintenance projections include unexpected major repairs and the replacement of expensive assets such as energy turbines, chillers and boilers etc. A poor capital budget can interrupt production while financing is obtained or emergency replacement is being performed resulting in a negative consequence to the bottom line which is sure to draw the Wrath of shareholders and executives.
The cause for the unexpected capital expenses is usually related to how well the assets are being maintained. Expensive assets require constant vigilance to ensure the early identification of problems or to address minor issues as they surface. Maintenance operations that are overly dependent on a single maintenance methodology such as predictive maintenance tools are often surprised when machinery breaks down earlier than expected. A well run maintenance management organization does not leave anything to chance.
Maintenance practices and methodology are not the only causes for bad capital budgets. A maintenance capital budget is by definition a forecast of projected expenses that are above and beyond normal operating repair and replacement of assets. Forecast can be prepared with greater accuracy if there is a historical record that can justify or shed light on why an asset will need to be replaced. For example, a good historical record for asset maintenance management has the ability to review work order trends for major equipment.
An increase in work orders may indicate that the cost of maintaining the asset is too high when compared to a purchase. A review of the maintenance history on important assets may also identify if the equipment is being properly maintained. A lack of maintenance can cause equipment to operate less efficiently or longer than expected to achieve the same results. The additional wear and tear can shorten the useful lifecycle of an asset.
One tool that is exceptional for managing both maintenance activities as well as tracking historical asset information is an Enterprise Asset Management (EAM) system. The EAM features for maintenance management automate manual work flow processes to ensure that maintenance operations are being proactive in the care of expensive equipment. The core database used to manage the work order lifecycle also keeps track of all asset information such as location, condition, costs and detailed maintenance activity. Management reports can be customized to provide a more accurate capital analysis for the coming year's capital budget.
Wrath is one of the 7 Deadly Sins of asset management but feeling the wrath of people who are upset about cash flow and profit margins can be avoided with a little planning and an EAM. How do you recognize Wrath in an organization? Look for pink slips and badly bruised egos.
About this Author
Stuart Smith writes about Enterprise Asset Management and Computerized Maintenance Management Software Solutions for Mintek Mobile Data Solutions. Mintek's Transcendent EAM/CMMS is a leading solution for facilities asset management.
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